Tech giants, Federal Reserve eye digital currency

By GCN Staff

Mar 20, 2015

According to recent reports IBM and Intel – and possibly the Federal Reserve – are considering using a popular technology associated with bitcoin – called blockchain – in order to create a new digital payments system.

Blockchain is a leger or a list of transactions that, as with bitcoin, allows traders to make transactions anonymously. IBM wants to use the technology to speed trades, cut transaction costs from banks and increase transparency. The blockchain would allow each transaction to be viewed by members of the network.

But unlike bitcoin, where the network is decentralized and there is no overseer, IBM’s proposed digital currency system would be controlled by central banks, the source told Reuters. "These coins will be part of the money supply," the source said. "It's the same money, just not a dollar bill with a serial number on it, but a token that sits on this blockchain."

The U.S. Federal Reserve is rumored to be in informal talks with IBM regarding the new digital financial transaction system. The Bank of England in 2014 described the technology as one that could transform the entire financial system.

Analysts speculate that the version of blockchain IBM and the Federal Reserve would use would incorporate more regulation and security, which might be less appealing for those who use it for anonymous transactions.

Intel is also reported to be interested in blockchain technology. Based on job postings for cryptographic researchers, Pymnts.com reported that it looks as though Intel wants to build a special team to harness the power of blockchain technology. The job would be with Intel Labs’ Special Innovation Projects group and would investigate, “hardware and software capabilities that advance the performance, robustness, and scalability of open, decentralized ledgers,” Pymnts.com reported.

Because digital transactions are faster and cheaper than traditional transactions, merchants as well as legislatures in Utah, New Hampshire and New York City have shown interest in accepting bitcoin, according to a report in Bitcoin Magazine.

“It seems likely that governments will try to appropriate selected aspects of digital currencies, and eliminate undesired aspects such as anonymity and volatility, to create efficient and cost-effective but fully regulated digital economies,” the article stated.